Energy Crisis: 'All options on table', regulatory initiatives possible next week

Tuesday, 13 August 2024

The electricity regulator says a dry winter and gas shortages have created “something of a perfect storm” for which there is no silver bullet.

The Electricity Authority is holding emergency board meetings and says “all options are on the table” as an energy crunch shuts down more of New Zealand’s industrial base.

Chief executive Sarah Gillies said it was investigating why wholesale electricity prices were “so volatile and so high” and more regulatory initiatives would be considered next week.

The authority is currently consulting on a proposal that would allow electricity generators to drain hydro lakes to lower levels than are usually allowed in September, though it has warned that could increase the risk of power shortages next year.

The authority has been a staunch defender of the current structure of the electricity market and some electricity retailers have accused it of being weak and ineffective.

Winston Peters accuses power companies of 'profiteering', as many high energy users say business is getting tougher.

Three years ago the EA said New Zealand’s electricity market was well-regarded internationally and was “doing the job it is designed to do, prompting former Flick Electric chief executive Steve O’Connor to say it needed to “see things as they are”.

Last week, Associate Energy Minister Shane Jones likened the authority to a “chocolate teapot”.

In an uncharacteristically blunt statement on Tuesday, the authority said it was “not comfortable with the current wholesale electricity prices”.

The EA voiced its concerns hours after one of the country’s largest industrial exporters, methanol manufacturer Methanex, announced it would suspend manufacturing until the end of October to free up gas for electricity generation.

Energy Minister Simeon Brown said he welcomed the agreement between Contact Energy, Genesis Energy and Methanex “to provide a short-term solution to New Zealand’s energy crunch so we can keep the lights on”.

Influential former National Party minister Steven Joyce says the energy sector needs a “telco moment”.

“The Government is considering a range of options on how to address New Zealand’s energy security,” he said in an emailed statement.

Gillies said wholesale power prices, which averaged more than $600 a megawatt-hour on Monday, showed the market was under stress.

“The biggest issue right now is supply. As a country, we simply don’t have enough ‘fuel’ in the system to deliver the energy we need in an affordable way,” Gillies said.

But she promised the authority would be “digging deeper” and would make generators give it more information, “so everyone can see exactly who is making what and to shine a light on the current situation”.

Senior former National Party minister Steven Joyce suggested on Saturday the Government could intervene in the power market in a similar way it had intervened in the telco market with the ultrafast broadband initiative, to deliver better outcomes.

Gillies said there was “no quick fix” to the sector’s woes.

“As the regulator we’re focused on using our powers to ensure the market is working effectively and new investment is encouraged because ultimately that is the only way out of this,” she said.